Microsoft revamps server licensing model

Microsoft has announced a radical change to its licensing model by switching from per-user to per-processor pricing for its next generation of server applications.

The Redmond giant said it has chosen a processor-based licensing model for Windows DNA (Distributed iNternet Architecture) 2000 servers to "alleviate the complexity and inconsistency of the current licensing models".

According to Microsoft, it is becoming harder for companies to estimate how many users they have - which previous pricing models relied on - because the internet enables any number of users to access the corporate network remotely. With a processor licence customers do not need to buy additional server licences, client access licences (Cals) or internet connector licences.

Dale Vile, senior analyst at Bloor Research, claimed that the move is a compromise by Microsoft. He said the company would have preferred to have applied a concurrent user pricing model, where price is based on the load placed on a system, such as that used by Citrix.

"Microsoft would either have to trust its customers or monitor them to price based on load, and it would find either difficult to implement," said Vile. "Per-processor pricing will simplify licensing arrangement. Some users pay less, but some will lose, particularly those organisations which have a few heavy users on a system."

Vile pointed out that companies installing systems that give them room for growth might be penalised under the different licensing structure, because they would be paying for processing power that they weren't initially using.

Simon Moores, chairman of the Microsoft Forums user group, said: "Licensing for the server alone no longer looks financially attractive in a world where servers have multiple processors. Like many vendors, Microsoft has realised that licensing the data centre rather than individual servers is financially attractive."

Mitul Mehta, group research manager at researcher Frost & Sullivan, said Microsoft is looking into the development of a hybrid licensing model, where users could pay either by processor or per seat across its entire range of products.

"At the enterprise level there will be a hybrid system, and large corporations will still call the shots on negotiating licensing deals," said Mehta. "Microsoft is trying out a new structure partly because of the migration of its channel to service-based delivery of software but also because it might be split due to the Department of Justice trial rulings."

Products given a processor-based licensing model include Application Center 2000, Biztalk Server 2000, Commerce Server 2000, Host Integration Server 2000, Internet Security and Acceleration Server 2000, and SQL Server 2000.

However, because of the broad SQL Server installed base, SQL Server 2000 will continue to be offered under older licensing models to customers using SQL Server in non web-based scenarios.

A SQL Server 2000 Standard Edition server licence and five Cals will cost $1489 (£982). By contrast, under per-processor licensing, SQL Server 2000 will be priced at $4999.